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Microsoft issues Yahoo an ultimatum

Microsoft issued a three-week ultimatum on Saturday for Yahoo to accept its US$44.6 billion takeover offer or face a hostile battle for the support of the Internet giant’s shareholders.

In an open letter to the Yahoo board of directors, Microsoft chief executive Steve Ballmer accused the company of avoiding serious negotiations over its Feb. 1 offer and warned that any further delays could result in a less attractive offer for Yahoo.

“We believe now is the time for our respective companies to authorize teams to sit down and negotiate a definitive agreement,” Ballmer said in the letter, which was posted on Microsoft’s Web site.

“If we have not concluded an agreement within the next three weeks, we will be compelled to take our case directly to your shareholders, including the initiation of a proxy contest to elect an alternative slate of directors for the Yahoo board,” the letter said.

The was no immediate response from Yahoo to Ballmer’s letter, which came in the wake of a reported meeting earlier last week between officials from the two companies.

The ultimatum was issued two months after the software giant’s unsolicited offer of US$31 a share for Yahoo, a 62 percent premium on Yahoo’s share price at the time.

Microsoft hopes that by taking over Yahoo, it can gain ground on Google’s overwhelming dominance of the lucrative Internet advertising business.

Yahoo, Google’s closest competitor, has steadily lost market share in the business, leaving it vulnerable to cash-rich Microsoft’s takeover effort.

But Yahoo rejected the offer, at first searching for a possible white knight partner — Rupert Murdoch’s News Corp was considered — to help fend off Microsoft, and then undertaking moves like postponing a deadline to nominate new directors to the Yahoo board to stall the bid.

On March 18 it said Yahoo was worth at least US$40 share – US$10 billion higher than Microsoft’s offer — and announced that it has a new three-year financial and strategic plan to restore cash flow and boost profits.

“Yahoo is positioned for accelerated financial growth — we have a powerful consumer brand, a huge global audience and a highly profitable operating model,” chief executive Jerry Yang (楊致遠) said in a statement at the time.

“Yahoo is poised to capture growth in display advertising where we believe growth will be greatest,” Yang said.

But Ballmer said in his letter on Saturday that the US economic slump and sagging stock market, if anything, had hurt Yahoo’s value.

In addition, he said, “public indicators suggest that Yahoo’s search and page view shares have declined.”

He also accused Yahoo’s board of avoiding serious discussions and of adopting plans that will raise the cost of Microsoft’s takeover.

“By any fair measure, the large premium we offered in January is even more significant today. We believe that the majority of your shareholders share this assessment,” he said.

“If we are forced to take an offer directly to your shareholders, that action will have an undesirable impact on the value of your company from our perspective which will be reflected in the terms of our proposal,” the letter said.
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